Top publication by Maximilian Todtenhaupt

14 October 2020 14:15

Top publication by Maximilian Todtenhaupt

The article "Capital gains taxation and funding for start-ups" has been published in Journal of Financial Economics.

Journal of Financial Economics is included on the NHH Bonus list and on the Financial Times Research Rank List, and it is also on level 4* in the ABS Academic Journal Guide.

Edwards, Alexander and Maximilian Todtenhaupt: Capital gains taxation and funding for start-ups, Journal of Financial Economics, Online 20.06.2020.


We examine how capital gains taxes affect investment in private start-up (i.e., pre-IPO) firms. Using data on capital raised in individual funding rounds, we estimate the effect of the 2010 SBJA, which implemented a full exemption from federal capital gains tax on the sale of qualified shares.

Because of the resulting higher expected after-tax returns, we hypothesize and find evidence consistent with this capital gains tax reduction increasing the amount of investment in start-up firms per funding round by about 12%. The effect is stronger in start-up firms that are likely to have greater administrative capacity. We estimate that about one-third of the tax benefit is captured by investors.